Patel said initial production from the state would go to local steel mills, but a resumption of mining means the world’s third-biggest supplier of iron ore could hope to regain its $6 billion, 100 million tonnes average annual exports, mainly to China, in 2012/13.

“In two to three months mining should happen, I believe the problem will be resolved by July,” Patel told Reuters in an interview, adding exports from Karnataka should then follow. He did not give a timeframe for such shipments.

Last week, the Supreme Court allowed mining to restart in mines of more than 50 hectares in Karnataka after their environmental plans are approved, potentially bringing 4.5 million tonnes per year to local steel producers. The state-run NMDC was earlier allowed to mine 1 million tonnes of ore every month by the apex court.

The union government has struggled to shape a mining policy balancing the drive by miners for exports with the need to ensure future supply to domestic steelmakers, who are ramping up production to supply India’ economic expansion.

India’s steel industry is aiming to produce between 100 and 110 million tonnes by 2020, up from existing capacity of 70 million, a target that would require almost all of the country’s entire existing iron ore output.

Patel said India would continue to export iron ore until domestic steel companies adopted technology that would allow them to process ore fines.

“Right now about 70 percent of our exports is of fines. If we don’t export then we have a storage problem,” he said. “And even when Indian steel companies begin using fines, we hope to have added to our mining capacity. And as long as we have surplus we will export.”

Just over half of India’s annual production of 240 million tonnes of iron ore is of higher grade, coveted by both domestic steelmakers, who lack the technology to use ore fines, and exporters who get a better price for higher quality.

“Our policy is clear. We have to provide for our own industries,” Patel said.

ILLEGAL MINING

The government wants to conserve resources, but says it opposes a blanket ban on exports. Some state governments, such as Karnataka, want a ban. The uncertainty around export policy has hurt India’s reputation as a stable supplier of iron ore.

Illegal sales have only worsened matters. Such mining in India is widespread and usually entails removing resources outside permitted zones. In an ongoing case in Karnataka, an anti-corruption ombudsman exposed an alleged $3.6 billion exports scam and described a “mafia-type of operation” with links between politicians and mining.

The Supreme Court has also cracked down, banning mining in Karnataka last year due to environmental concerns. The court is gradually lifting that ban.

It has also asked the state to resume exports of iron ore, but the state government has yet to approve any shipments.

Patel said the government was taking steps to rein in illegal sales, including setting up satellite tracking of consignments and electronic checkposts.

The government has also proposed a mining bill that will create an independent regulator, with the aim of improving transparency. The bill imposes profit and royalty sharing arrangements with villagers as well as encouraging foreign investment.

“I expect the bill to be approved by parliament around August when it convenes,” Patel said.

(Editing by David Holmes)

Dinsha Patel said initial production from the southern state
would go to local steel mills, but a resumption of mining means
the world’s third-biggest supplier of iron ore could hope to
regain its $6 billion, 100 million tonnes average annual
exports, mainly to China, in 2012/13.

“In two to three months mining should happen, I believe the
problem will be resolved by July,” Patel told Reuters in an
interview, adding exports from Karnataka should then follow. He
did not give a timeframe for such shipments.

Last week, India’s top court allowed mining to restart in
mines of more than 50 hectares in Karnataka after their
environmental plans are approved, potentially bringing 4.5
million tonnes per year to local steel producers. The state-run
NMDC was earlier allowed to mine 1 million tonnes of ore every
month by the Supreme Court.

India’s government has struggled to shape a mining policy
balancing the drive by miners for exports with the need to
ensure future supply to domestic steelmakers, who are ramping up
production to supply India’ economic expansion.

India’s steel industry is aiming to produce between 100 and
110 million tonnes by 2020, up from existing capacity of 70
million, a target that would require almost all of the country’s
entire existing iron ore output.

Patel said India would continue to export iron ore until
domestic steel companies adopted technology that would allow
them to process ore fines.

“Right now about 70 percent of our exports is of fines. If
we don’t export then we have a storage problem,” he said. “And
even when Indian steel companies begin using fines, we hope to
have added to our mining capacity. And as long as we have
surplus we will export.”

Just over half of India’s annual production of 240 million
tonnes of iron ore is of higher grade, coveted by both domestic
steelmakers, who lack the technology to use ore fines, and
exporters who get a better price for higher quality.

“Our policy is clear. We have to provide for our own
industries,” Patel said.

ILLEGAL MINING

The government wants to conserve resources, but says it
opposes a blanket ban on exports. Some state governments, such
as Karnataka, want a ban. The uncertainty around export policy
has hurt India’s reputation as a stable supplier of iron ore.

Illegal sales have only worsened matters. Such mining in
India is widespread and usually entails removing resources
outside permitted zones. In an ongoing case in Karnataka, an
anti-corruption ombudsman exposed an alleged $3.6 billion
exports scam and described a “mafia-type of operation” with
links between politicians and mining.

The country’s Supreme Court has also cracked down, banning
mining in Karnataka last year due to environmental concerns. The
court is gradually lifting that ban.

It has also asked the state to resume exports of iron ore,
but the state government has yet to approve any shipments.

Patel said the government was taking steps to rein in
illegal sales, including setting up satellite tracking of
consignments and electronic checkposts.

The government has also proposed a mining bill that will
create an independent regulator, with the aim of improving
transparency. The bill imposes profit and royalty sharing
arrangements with villagers as well as encouraging foreign
investment.

“I expect the bill to be approved by parliament around
August when it convenes,” Patel said.

(Editing by David Holmes)

The world’s biggest coal miner has been ordered by the
government, which owns 90 percent of Coal India, to sign
contracts agreeing to supply at least 80 percent of the coal
requirement of utilities that have been hobbled by scarce fuel.

The company’s board approved the proposal on Monday and
offered to pay a penalty of 0.01 percent if it fell behind
schedule.

“This is a task well begun, but only half done,” said A.
Issac George, chief financial officer at GVK Power, referring to
the supply contracts that were proposed after industry captains
such as Ratan Tata and Anil Ambani approached Prime Minister
Manmohan Singh for an end to fuel shortage.

The penalty would apply only after three years and so
changes almost nothing in the short term for many power plants,
which have been running below capacity due to fuel shortage over
the past year.

Hemmed in by regulatory hurdles and land acquisition
problems, Coal India’s production has stagnated over the past
three years and power companies were hoping a stringent penalty
clause in the fuel supply pact would have goaded the company to
take measures to boost output.

Coal India expects to raise its output to 464 million tonnes
in 2012/13, after producing about 436 million tonnes in the
fiscal year that ended in March – missing its scaled down
target.

It would need an additional 64 million tonnes in the current
fiscal year to meet obligations under the new fuel pacts. But
the company may not be able to boost production in line with
demand and may have to resort to imports.

Coal India is expected to sign fuel supply pacts with power
producers for 20,000 MW capacity this week. Agreements for an
additional 40,000 MW capacity will be signed later.

“There is no repercussion in not meeting the shortfall. Once
again, the assurance is on a best effort basis, as before,” said
Ashok Khurana, director general at Association of Power
Producers.

The company, which went public in 2010, has been under
pressure from a shareholder – The Children’s Investment Fund
Management (TCI) of the UK – not to give in to the government
diktat to supply coal cheaply to power producers.

Domestic coal is usually at least 40 percent cheaper than
global prices. Typically, supply guarantees come with an
additional charge to the consumer. It is not immediately clear
if Coal India would levy such a charge.

Some power producers such as state-run NTPC,
India’s top utility, and private sector Lanco Infratech
see the revival of binding fuel supply contracts as a
positive sign that would help companies get easy funding for
their projects.

“At least agreements will be in place. And now we can keep
working at ensuring there is more credible penalty,” said K.
Rajagopal, CEO-thermal at Lanco Infratech, whose operational
1,800 MW plants would immediately benefit.

Lenders have been averse to funding projects that do not
have assured long-term fuel supply, delaying the ventures and
escalating their costs. “The fuel supply agreements will give
lenders more confidence,” said Rajagopal.

India plans to add 76,000 MW capacity to its existing
191,000 MW in the next five years and would need to
significantly raise its coal output to fuel these plants. At
present, more than half of the total capacity is fueled by coal.

(Editing by Ranjit Gangadharan)

From January 1, all airlines using EU airports have come under the European Union Emissions Trading Scheme, prompting a volley of retaliatory threats, including of a possible trade war.

U.S. airlines have said they would grudgingly comply, but China has barred its carriers from participating unless they are given permission to do so.

India on Wednesday formally forbad its airlines from participating having earlier said it would boycott the scheme.

“For the environment ministry, for me, it is a deal-breaker because you simply cannot bring this into climate change discourse and disguise unilateral trade measures under climate change,” Jayanthi Natarajan said on Wednesday.

“I strongly believe that as far as climate change discussions are concerned, this is unacceptable.”

The minister leads India’s negotiations at global climate change talks. It was not immediately clear if her comments reflected government policy in India.

A European Commission spokesman said the European Union was willing to cut emissions faster and more deeply than emerging nations, such as India — the third biggest carbon emitter after China and the United States.

“The EU has been asked to reduce emissions more and faster than developing countries. We are happy to do that,” the European Commission’s climate spokesman Isaac Valero-Ladron said.

“I don’t see why this should be a deal-breaker if both share the same objective, which is reducing global emissions.”

Any airline that does not comply with the EU law faces fines of 100 euros for each tonne of carbon dioxide emitted for which they have not surrendered allowances. In the case of persistent offenders, the EU could ban them from its airports.

The cost of compliance is much less significant at only around 2 euros per passenger for a flight from Beijing to Frankfurt, for instance, and that can be fed into fares.

Critics, however, have said their concern is the extra-territorial scope of the EU’s law and that it unfairly charges non-European carriers by making them pay for the entire route, not just the European stretch of the journey.

FILLED A VACUUM

The European Commission has said it was driven to making all airlines pay for their emissions after more than a decade of talks at the United Nations’ ICAO failed to find a global solution to rising emissions of greenhouse gases from aviation.

Since tensions have flared, efforts at the ICAO have gained momentum, although many environmental groups still question whether it can deliver a viable plan.

Outside the official ICAO framework, a so-called “coalition of the unwilling” bringing together more than 20 governments opposed to the EU scheme has held a series of meetings. The next is planned for Saudi Arabia around the middle of the year.

Before that, India wants talks with China and Russia to decide on a plan of action, a government official said.

“The onus is on them EU.L to stop a trade war. Once we meet China and Russia, it will be clear that there will be a wall between them and the rest of the world,” a government source told Reuters.

EU Climate Commissioner Connie Hedegaard has repeatedly said the only reason for the European Union to modify its law would be if the U.N.’s ICAO could come up with a global plan to curb airline emissions.

She has also said the Commission, the EU’s executive arm, would take account of equivalent measures, which have not been clearly defined but would include other ways of reducing airline emissions, when considering possible waivers.

Asked if India could cite any climate change actions that would qualify, Natarajan said: “Why should we? I am saying this tax is unacceptable.”

Critics of the EU law describe it as a tax, but the Commission says it is not and an advocate general at Europe’s highest court agreed, saying the ETS was a mechanism based on supply and demand.

The European Court of Justice in a ruling in December also said the EU’s law was consistent with international law.

At climate change talks in Durban last year, India was one of the most strongly opposed to signing up to a deal that would for the first time bring in all the big carbon emitters.

Hedegaard, who spearheaded the EU’s drive to get an accord, was involved in last minute haggling with India to get a compromise agreement sealed.

Earlier this year, Hedegaard visited India to try to build on the tentative agreement.

The next annual U.N. climate change summit will take place in Doha at the end of the year.

(Additional reporting by Anurag Kotoky in Delhi and Barbara Lewis in Brussels, editing by William Hardy and Jason Neely)

From January 1, all airlines using EU airports have come under the European Union Emissions Trading Scheme (ETS).

U.S. airlines have said they would grudgingly comply, but China has barred its carriers from participating unless they are given permission to do so and India has said it would boycott the scheme.

“For the environment ministry, for me it is a deal-breaker because you simply cannot bring this into climate change discourse and disguise unilateral trade measures under climate change,” Jayanthi Natarajan said on Wednesday.

“I strongly believe that as far as climate change discussions are concerned, this is unacceptable.”

The minister leads India’s negotiations at global climate change talks. It was not immediately clear if her comments reflected government policy in India.

Any airline that does not comply faces fines of 100 euros ($128) for each metric tonne of carbon dioxide emitted for which they have not surrendered allowances. In the case of persistent offenders, the EU has the right to ban airlines from its airports.

The cost of compliance is much less significant at only around 2 euros per passenger for a flight from Beijing to Frankfurt, for instance, and that can be fed into fares.

Critics, however, have said their concern is the extra-territorial scope of the EU’s law and that it unfairly charges non-European carriers by making them pay for the entire route, not just the European stretch of the journey.

FILLED A VACUUM

The European Commission has said it was driven to making all airlines pay for their emissions after more than a decade of talks at the United Nations’ ICAO failed to find a global solution to rising emissions of greenhouse gases from aviation.

Since tensions have flared, efforts at the ICAO have gained momentum, although many environmental groups still question whether it can deliver a viable plan.

Asked for comment, a European Commission spokesman referred to one of Climate Commissioner Connie Hedegaard’s most recent interviews in the Indian press.

“If Europe has a law that somebody does not like it’s not right that by threatening us they think they can make a democratic system change democratically made laws,” she told The Hindu newspaper at the end of March.

“In the world of the 21st century it makes sense to make polluters pay.”

Hedegaard has repeatedly said the only reason for the European Union to modify its law would be if the U.N.’s ICAO could come up with a global scheme to curb airline emissions.

She has also said the Commission, the EU’s executive arm, would take account of equivalent measures, which have not been clearly defined but would include other ways of reducing airline emissions, when considering possible waivers.

Asked if India could cite any climate change actions that would qualify, Natarajan said: “Why should we? I am saying this tax is unacceptable.”

Critics of the EU law describe it as a tax, but the Commission says it is not and an advocate general at Europe’s highest court agreed, saying the Emission Trading Scheme was a mechanism based on supply and demand.

The European Court of Justice in a ruling in December also said the EU’s law was consistent with international law.

At climate change talks in Durban last year, India was one of the most strongly opposed to signing up to a deal that would for the first time bring in all the big emitters.

Hedegaard, who spearheaded the EU’s drive to get an accord, was involved in last minute haggling with India to get a compromise agreement sealed.

Earlier this year, Hedegaard visited India to try to build on the tentative agreement.

The next annual U.N. climate change summit will take place in Doha at the end of the year.

(Additional reporting by Barbara Lewis in Brussels, editing by William Hardy)

The world’s biggest coal miner, however, stands to gain
equal levels of rewards even if it meets only 90 percent of its
commitments under these pacts with power plants that are due to
be commissioned by 2015 and generate 50,000 megawatts of power.

Coal India’s production has stagnated due to regulatory and
infrastructure hurdles. In 2011/12, it missed even a scaled down
output target, producing about 436 million tonnes. It now aims
to produce 470 million tonnes in 2012/13.

The under-performance by the coal monopoly has worried Prime
Minister Manmohan Singh, already struggling with a slowing
economy, and he is now pushing the company to boost output which
could help many power plants that are running below capacity.

“What is being proposed is if the company fails to provide
less than 80 percent then it will be penalised in a graded
manner,” said a senior source in the coal ministry on condition
of anonymity as the proposals are still being finalised.

“Between 75 to 80 percent supply (of the contracted amount),
it will be fined 10 percent of the average cost of the
shortfall. For 70-75 percent of supply the penalty will be 20
percent and below 70 percent supply will attract a 40 percent
penalty.”

Average domestic coal prices are 1,600-1,700 rupees
($31.76-33.74) per tonne and are anywhere between 40-70 percent
below international spot prices as they are capped by the
government which is keen to provide cheap electricity.

Indonesia spot coal prices — the biggest source for India’s
imports — are currently around $65 per tonne.

Singh’s decision to force Coal India to sign guaranteed fuel
supply pacts followed intensive lobbying by top executives from
India’s power companies, who had sought his help to boost
supplies of coal. Singh’s office has said Coal India will have
to ensure supplies, including by imports if needed.

Coal India has also said it needs more clarity on who will
foot the bill for any imports before it commits to major
purchases needed to meet supply obligations to power producers.

India’s coal demand is set to jump to 981 million tonnes by
2017, official data shows, but output in this period may only be
at 715 million tonnes, leaving imports to bridge the gap.

Coal accounts for about half of India’s power generation.

Last month, a government auditor’s draft report said India
lost up to $210 billion in revenue by selling coal deposits too
cheaply, in another headache for Singh’s government which has
spent almost all of its second term fighting graft allegations.

(Editing by Jo Winterbottom)

New Delhi is expected to miss this fiscal year’s deficit target of 4.6 percent of GDP by a wide margin, and it faces a difficult task to cut a soaring subsidy bill and revive slowing growth.

A yawning fiscal shortfall is not only making credit dearer for private investment, it is also foiling the central bank’s efforts to control inflation.

The Reserve Bank of India left interest rates unchanged on Thursday, warning of resurgent inflation risks from surging crude oil prices, fiscal slippage and rupee depreciation.

(Read: RBI keeps interest rates unchanged, click here)

“While an expanded deficit can boost consumption and economic growth, this is medicine akin to antibiotics. It is very effective if properly used and in limited doses, but can cause harm if used over a prolonged period,” the economic survey by the finance ministry said.

It suggested an increase in tax rates to boost tax-to-GDP ratio to 13 percent by 2016/17 from 10.5 percent currently. It also favoured a cap on the fuel subsidy, which has already topped 536 billion rupees this year — more than double the target for 2011/12.

The recommendation comes at a time when Prime Minister Manmohan Singh’s government is facing a political storm for raising railway passenger fares on Wednesday for the first time in eight years.

In a country where populist policies are often rewarded with electoral gains, any decision to tinker with subsidies and tax rates could test the Congress party-led ruling coalition’s political nerve.

Finance Minister Pranab Mukherjee is widely expected to unveil measures to trim the fiscal gap when he presents the annual budget. But much will depend on the government’s resolve to cut its subsidy bill.

The economic survey said a lower fiscal deficit will help investments to rebound quickly.

Economic growth faltered to a three-year low of 6.1 percent in the December quarter following a contraction in investment, and the pace of economic expansion this fiscal year is forecast to dip below 7 percent for the first time in three years.

Capital investment has dropped to 30 percent of GDP in the fiscal year ending on March 31 from 32 percent a year ago.

The economic survey, however, forecast a pick up in the economy in 2012/13 as it expects fiscal consolidation along with lower inflation will help investments recover.

It expects annual economic growth to be about 7.6 percent in 2012/13 and 8.6 percent in the year after.

(Writing by Rajesh Kumar Singh; Editing by Ranjit Gangadharan)

New Delhi is expected to miss this fiscal year’s deficit
target of 4.6 percent of GDP by a wide margin, and it faces a
difficult task to cut a soaring subsidy bill and revive slowing
growth.

A yawning fiscal shortfall is not only making credit dearer
for private investment, it is also foiling the central bank’s
efforts to control inflation.

The Reserve Bank of India left interest rates unchanged on
Thursday, warning of resurgent inflation risks from surging
crude oil prices, fiscal slippage and rupee depreciation.

“While an expanded deficit can boost consumption and
economic growth, this is medicine akin to antibiotics. It is
very effective if properly used and in limited doses, but can
cause harm if used over a prolonged period,” the economic survey
by the finance ministry said.

It suggested an increase in tax rates to boost tax-to-GDP
ratio to 13 percent by 2016/17 from 10.5 percent currently. It
also favoured a cap on the fuel subsidy, which has already
topped 536 billion rupees ($10.7 billion) this year — more than
double the target for 2011/12.

The recommendation comes at a time when Prime Minister
Manmohan Singh’s government is facing a political storm for
raising railway passenger fares on Wednesday for the first time
in eight years.

In a country where populist policies are often rewarded with
electoral gains, any decision to tinker with subsidies and tax
rates could test the Congress party-led ruling coalition’s
political nerve.

Finance Minister Pranab Mukherjee is widely expected to
unveil measures to trim the federal fiscal gap when he presents
the annual budget. But much will depend on the government’s
resolve to cut its subsidy bill.

The economic survey said a lower fiscal deficit will help
investments to rebound quickly.

Economic growth faltered to a three-year low of 6.1 percent
in the December quarter following a contraction in investment,
and the pace of economic expansion this fiscal year is forecast
to dip below 7 percent for the first time in three years.

Capital investment has dropped to 30 percent of GDP in the
fiscal year ending on March 31 from 32 percent a year ago.

The economic survey, however, forecast a pick up in the
economy in 2012/13 as it expects fiscal consolidation along with
lower inflation will help investments recover.

It expects annual economic growth to be about 7.6 percent in
2012/13 and 8.6 percent in the year after.

“We haven’t heard from the government. We are talking to PSU
(state-run) insurance companies. They (talks) are positive
discussions,” Hajara told Reuters on the sidelines of a coal
industry conference.

The European Union announced new sanctions in January which
will mean a total ban on European insurers indemnifying ships
that carry Iranian crude and oil products — either on term or
spot basis — from July.

But Shipping Corp was forced to cancel an Iranian crude oil
shipment last month because its European insurers refused to
cover the spot deal, struck after Jan. 23 when the EU announced
the plan for sanctions on the OPEC member.

Europe and the United States are enforcing tougher economic
sanctions in the hope of isolating Iran and forcing it to halt
its nuclear programme, which the West fears will be used to
develop nuclear weapons.

Iran, the biggest producer in OPEC after Saudi Arabia and
the world’s fifth largest oil exporter, says its nuclear
programme is purely for peaceful purposes.

Iran is India’s second-biggest supplier of oil after Saudi
Arabia, with some $11 billion a year in shipments meeting about
12 percent of India’s crude import needs.

Indian shipping firms will find it difficult to obtain
replacement insurance coverage to continue importing Iranian
crude oil after the new European Union sanctions come into
effect, sources have said.

India is weighing up options including extending sovereign
guarantees for its shipping lines and buying Iran oil on a
delivered basis, former Shipping Secretary K Mohandas said last
month.

“July is a long time away, we hope something will happen
before that,” Hajara said, adding his firm was in talks with the
the EU P&I club for ways to continue insurance for Iran cover.

He said Shipping Corp may look at getting insurance coverage
from P&I clubs which are not affected by the sanctions. China,
Hong Kong and Japan all have insurance arrangements for trade
with Iran.

(Reporting by Krittivas Mukherjee and Ratnajyoti Dutta; Writing
by Nidhi Verma; Editing by Jo Winterbottom)

Prices could rise “moderately” as a result of any export tax
on coal by Indonesia, according to 75 percent of the delegates
who took part in the electronic vote on Wednesday.

About 58 percent of respondents said in 2013 India would be
Indonesia’s biggest buyer of thermal coal even if the export tax
was imposed. No details on number of voters was available.

The delegates who voted in the poll represented end-users,
producers, traders, brokers, surveyors and shipping agents.

Indonesia, a major global producer of raw materials, said
last year it would look to introduce export taxes for coal and
base metals from 2012, as it tries to encourage more investment
in its mining sector.

Coal demand in India, Asia’s third-largest economy, is set
to jump to 980 million tonnes by 2017, but output in this period
may only be 795 million tonnes, coal ministry figures say.

Output from state-run Coal India, which accounts
for about 80 percent of the country’s production, should be 464
million tonnes in 2012/13 and about 440 million tonnes in
2011/12 — suggesting there will continue to be a substantial
gap to be filled by imports.

Indonesia is currently the leading supplier to India
followed by Australia.

Australia could take over the leading slot early next
decade, as Indonesia focuses on filling domestic demand,
research consultants Wood Mackenzie said.

(Editing by Jo Winterbottom)